LetsGoToo

Good point. One has to wonder if Citi thinks it has better odds if the current AA management makes this decision.

JMN57

Even under these circumstances, current management won't solely make this decision. It's probably material to the merger deal itself so I'd guess US would have to weigh in and commit as well.

grahampros

I would agree with that. Just look at US thread to see all the problems with Barclays. I'm not a huge Citi fan, but the AAdvantage program they have done well.

I dont blame Citi for pushing the issue a bit. They are a secured creditor so they have every right to push it.

diver858

Is the long-term contract between Citi and AA secured? OP suggests only the $1 billion is secured, balance should be subject to BK11 re-negotiation.

That assumes the combined entity has an exclusivity deal with Citi; as discussed in another thread, there is precedent for multiple card providers one program.

The Aadvantage program is one of AMR's most valuable assets, would like to see Horton go to the mat on this one. Come on, Jamie Diamond...

Upgraded!

I'm guessing that DL has some kind of exclusivity in its agreement with Amex, but I could be wrong.

ETA: Also remember that Amex credit and charge cards are operated very differently. The current lounge access as well as US status via Centurion (which I expect to go away post-merger) are all via charge cards (Platinum and Centurion). Miles, however, are earned through credit cards (like the cards Amex offers for the DL, B6 and SPG programs). They are separate lines of business for Amex and the relationships are managed in different ways, under different terms.

So, while there's no reason AA couldn't explore going with Amex instead (except as I noted above), the simple fact that the charge cards offer some AA-specific benefits doesn't necessarily indicate that it will do so.

One thing that might also come into play is where, outside of the US, they tend to sign up a lot of credit card members. If a good part of the business is done in places where Amex isn't widely accepted, that could also be a factor.

burlax

It is not.

If reorg plan failed to spell out how AA is going to deal with its obligations towards Citi, which the motion seems to imply, it's very logical for Citi to compel AA to make the decision now - it brings certainty, allows timely litigation of rejection ( if AA attempts to reject ), and prevents AA from raising certain defenses once the reorg plan is approved by the court. Citi is predictably protecting its interests. Nothing more nothing less.

JMN57

Of course Citi is protecting its interest.

Not having read the filing, I can't be sure but what it seems to imply (as the article states "In addition to the objections, Citibank filed a motion demanding that American decide by July 2 if it would remain with Citibank") that Citi is stating that AA needs to either reaffirm its secured debt to Citi or redeem it and that part of the reaffirmation is the continued existence of the AA/Citi card relationship. If the agreement has a long tail and break-up provisions, that will tie the hands of US/Parker post-merger. What is also implied is that if AA does not affirm the terms of the secured debt, Citi will want to have it redeemed as part of reorg plan.

jfinsocal

I obviously don't have access to the agreements but I don't see why the merged entity (USdbaAA) can't have credit card agreements with both Barclays and Citibank.

The Barclays card has great benefits by the way - two $99 companion passes, 5000 miles off award travel, 10k PQM after $25,000 spend, with a reasonable annual fee. I suspect these are benefits better than what Citibank offers in their current AA branded product. Be careful what you wish for - legacy AA customers might like the Barclays product better.

Upgraded!

I think even if they keep both something like this will go away. Currently AA's Citi Executive card gives 10k miles, but only after shelling out a $450 annual fee and spending $40k.

dayone

AA pitched its initial CC concept to Amex. Amex passed, so AA made a deal with Citi.

Happy

Many years ago? When AMEX already had DL or not?

Dave Noble

AA does use other companies elsewhere; e.g. in UK, AA Affinity CCs are offered by MBNA

Upgraded!

Right, but they're still Visa and MasterCard cards, aren't they? Not sure if that matters or if it's all about the bank.

Dave Noble

When opening an MDNA account , MBNA provides both and American Express and a Visa card. The AX card gets a better earning rate
http://www.mbna.co.uk/credit-cards/a...e-credit-card/

JMN57

I think part of the issue is specifically the brand names (AA, AAdvantage, USAirways, Dividend Miles). Citi would argue that it has invested to create brand equity around AAdvantage and who knows, there may be specific exclusive agreements (with maybe some geographical exceptions as noted above) with current AA about who provides credit card services. Alternatively, Barclays has invested into USAirways/Dividend Miles brands. Citi will probably actively defend their exclusive use of the AAdvantage (from a card perspective) brand.